The Tourism Business

Chapter 1

Learning Objectives
 Gain an understanding of
 the components/sectors of the tourism
business (supply)
 the positive and negative impacts of
tourism
 how tourism impacts the hotel industry
 tourists’ needs and motivations +
consumer behaviour in tourism
 the tourism demand drivers in the new
millennium

1
 Definition of Tourism

“ Tourism comprises the activities of persons travelling to and

staying in places outside their usual environment for not
more than one consecutive year for leisure, business or
other purposes”

www.world-tourism.org

“The total number of persons who travel, or wish to travel, to

use tourist facilities and services at places away from their
places of work and residence”
(Matheison & Wall, 1982)

Scope of the Tourism Industry

From the French word “hospice”

 to provide for the weary (tired)
 take care of those traveling

Hospitality Industry is an umbrella term

for a broad variety of service industries
including, but not limited to hotels and
resorts, foodservice, casinos and the
travel trade.

2
The Tourism Sector

Benefits of Tourism

 Direct employment in hotels, tours,

restaurants, retail establishments, and
transportation, attractions etc
 Support industries and professions

 Multiplier effect as tourist expenditures

are recycled through the local economy
 Tourism receipts: source of revenue for
the government

3
 The Multiplier Effect

 In its simplest form, the multiplier effect is

how many times money spent by a tourist
is circulated in a country’s economy
 3 important concepts:
 Direct Impact: The tourist’s initial spending which
creates direct revenue
 Indirect Impact: The initial process of re-spending
i.e., employees’ salary
 Induced Impact: The secondary process of re-
spending, i.e., employees’ purchases

4
Tourism in Singapore 2014
 In 2014, Singapore attracted 15.1million visitors
(versus 15.6 million in 2013) with tourism receipts
$23.5 billion collected.
 Travel & Tourism accounts for about 10.9% of
Singapore’s GDP with more than 290,000 people
employed in tourism (8.7% of total employment)
 Singapore’s top five tourist markets are i) Indonesia
ii) China iii) Australia iv) Malaysia and v) India.
 Gazetted hotel room revenue: >$2.9 billion
 Average stay – 3.7 days
 STB targets $30 billion in tourism receipts in 2015

Source: www.stb.org.sg

Source: www.stb.org.sg

5
 Why Measure Tourism Demand?
 Public sector (government) needs
 Economic benefits– balance of payments
 Social and environmental impacts
 Land, infrastructure and human resource planning
 Investments
 Marketing
 Tax gains
 Licensing
 Immigration
 Security & health

 Private sector needs

 Plan, manage, develop, invest, market

Demand Data Required

 Volume – how many?
 Origin - from where?
 Demographics – who?
 Length of stay – how long?
 Time of visit – when?
seasonality
 Purpose – why?
 Transport mode – how?
 Places/regions visited –
where?
 Type of accommodation –
where?
 Main activities – what?
 How booked?
 Sources of information?
 Size & type of party?
 Repeat or first-timer?
 How much spent? (total, per
visit, per day, per purpose)
 Where spent?
 What spent on?
 Who spent?
 Cross-tabulations
 Multiplier effects

6
 Sources of Information

 Primary Sources  Secondary Sources

 Immigration cards  National Tourism Organizations
 World Tourism Organization
 Exit surveys (WTO)
 Surveys  Pacific Asia Travel Association
 Airports (PATA)
 World Travel & Tourism Council
 Banks & money changers (WTTC)
(foreign exchange)  International Air Transport
 Hotel registrations Association (IATA)
 Economic Intelligence Unit
(EIU)
 Organization for Economic
Cooperation & Development
(OECD)

Who Counts?
 Tourists
 Visitors who stay overnight for purpose of
• Leisure & recreation
• Business & professional
• Others e.g. studies, health, overnight transit etc.
 Includes non-nationals (foreigners), nationals
residing abroad, non-resident crew members.

 Same-day visitors
 Cruise passengers
 Day visitors
 Non-resident crews

7
Who Does Not Count?

 Border workers
 Temporary immigrants
 Permanent immigrants
 Nomads
 Transit passengers
 Refugees
 Members of armed forces, their servants and
dependants
 Representation of consulates, their servants and
dependants
 Diplomats

Domestic Tourism
 Definition of domestic visitors is same as that of
international visitors (tourists and same-day visitors)
except that they are from within the country

 Important in bigger countries such as China, India,

Japan and USA and also developing countries such as
Vietnam and Myanmar

8
 Economic Impact
Positive Negative
 Creates jobs, increases wealth  Leakages
 Increases government revenue  Displacement
 Catalyst for diversification
 Loss of Control
 Increases entrepreneurial
activities  Over-dependence
 Improves infrastructure  Price/Cost Increase

Environmental Impacts
Positive
 Conservation - natural and built
 Rejuvenation e.g. disused mines
 Environmental beautification
 Protection of flora and fauna
 Improved accessibility
Negative
 Flora and fauna destruction
 Erosion
 Depletion/ destruction of
natural resources & heritage
sites
 Pollution- air, water, noise,
visual: architectural
 Overbuilding
 Environmental hazards

9
 Socio-Cultural Impacts

Positive
 Preservation & restoration
 Increased pride of locals
 Better cross-cultural
understanding
 Increased leisure and recreation
for locals
 Revival of local arts/crafts,
dance, music, food
  new skills, talents, languages
 Mitigates depopulation of
remote areas & migration
Negative
 Demonstration effects-
desiring, aping, resentment,
envy, exploitation, migration,
class distinctions
 Destruction/damage of
heritage sites
 Over-crowding, space
competition
 Loss of morals- crime, sex-
tourism, gambling
 Cultural assimilation & drift-
cultural erosion
 Culture commercialization-
fake folklore, airport art, staged
authenticity,

Reasons People Travel

 To experience new & different surroundings and
other culture (“see the world”)
 To rest and relax
 Visiting friends and relatives (VFR)
 To view, or participate in, sporting/recreational
activities (World Cup, F1, Olympic Games)
 For educational purpose (study trips)
 For business
 Others (medical tourism, gastronomy tourism, wine
tourism etc)

10
Factors Affecting Travel Demand at
the Individual Level
 Lifestyle
 Income & employment
 Paid holiday entitlement
 Level of education
 Personal mobility
 Race and gender

 Lifecycle Factors
 Domestic age – childhood, adolescence/young adulthood,
marriage, empty nest stage, old age
 Preoccupation, interests and activities differ at the various
lifecycle stages

Motivations For Travel

 To satisfy needs & wants:

 Physical : relaxation, recreation, refreshment, activity
 Social: escape, relationships, lifestyles, culture
 Intellectual: learn about, examine, study
 Status: conform/be different, recognition, ego-boost
 Practical: business, meetings, work
 Health: physical, mental
 Mental: escape boredom, tension
 Achievement: adventure, challenge
 Spiritual e.g. Haj, Lourdes,

11
Consumer Behaviour
 Understand consumer behaviour so as to
better influence buying behaviour

 5 Premises of consumer behavior:

1. Consumer behaviour is purposeful & goal-oriented
2. Consumers have free choice
3. Consumer behaviour is a process: Many influences on
buying- before, during & after consumption
4. Consumer behaviour can be influenced
5. Consumers need to be educated: Marketer’s responsibility
to teach customers to act in their own interest

Marketing Implications
 Identify target customer markets
 Know target customer’s needs & wants, the value
attributes they seek, the buying/consumption pattern
 Choose marketing strategy that will
 Make target customers identify a problem
 Get attention, assist comprehension, induce
acceptance & retention
 Influence target customer’s initial perception

 Know what superior value means to your target

customers to assist them in evaluating alternatives
 Create right branding strategy vis-à-vis target
markets

12
 3. Typologies
 Refer to classifications of tourists based on their
behavior.

 Attempt to address the diversity of tourism

 "tourist typologies reflect the diversity of individual motivations,
styles, interests and values, and the subsequent differences
often correlate with specific disciplinary research interests."

 These typologies serve as guide to tourism business

owners as to what products, services and facilities
should be sold to certain tourists having the same
behavior.

Plog’s (1974) Psychocentric-

Allocentric Model

 Stanley Plog (1972) classified tourists along a

continuum with allocentrics on one end and
psychocentrics on the other end.

 Generally, allocentrics seeks adventure while

psychocentrics seek the comfort of familiar
surroundings in their tourism experiences.

13
 Plog’s Psychographic Typology
(based on US citizens)
 Psychocentric
• Not venturesome, anxious
about their daily lives and
believed they had little
control over their lives;
prefer mass tourism
 Allocentric
• Prefer to be independent
and have non-organised
tourist experiences to little
known destinations
 Midcentric
• Tourists with characteristics
that fall in between fall in
between

Cohen (1972) Typologies

 Cohen (1972): 4 categories of tourists

 Organised Mass Tourist
• low on adventure; purchases packaged tour; little contact
with local culture
 Individual Mass Tourist
• same as above but more flexibility and scope for personal
choice; organized tour in an environmental bubble
 Explorer
• independently organized, look for comfortable
accommodation & reliable transport
 Drifter
• lives with locals, pay his/her way, immersed in culture

14
 Cohen’s Tourist Categories

The organized mass tourist

•package tour fixed itineraries, planned stops, guided organizers making the decisions
•Familiarity at a maximum and novelty at a minimum

The individual mass tourist

•Tour not entirely planned by others
•Tourist having some control over his/her itinerary and time allocations
•Major arrangements made through travel intermediary
•Tourist remaining largely within the environmental bubble of home country ways and
mixing little with locals
•Dominant familiarity

The explorer
•Tourist usually planning his/her own trips and trying to avoid developed tourist
attractions
•Desire to mix with locals but still protected within the environmental bubble.
•Dominant novelty, tourist not fully integrating with locals

The drifter
•Tourist plan their trip alone
•Tourists avoid tourist attractions and live with the locals
•Almost entirely immersed in the host culture, sharing its shelter, food and habits
•Novelty is dominant and familiarity disappears.

The logic of typologies

 Useful in assisting marketing strategies and providing a
basis for economic measurement and forecast.

 Aim: to classify
 “represent a tradition of flat footed sociology and
psychology which is driven by an unhappy marriage
between marketing research and positivist ambitions
of scientific labelling” (Logren)

15
 The trouble with typologies

 Overly simplification:
 they are based on stereotypes
 that are not sensitive to issues relating gender
and cultural diversity
 Leaves many tourist outside its scope
 Cannot encompass the complexity
 Tourist definitions tend to be conceptually very
neat however reality is much more complex.
 E.g tourists may fall in more than one category

Motivation Theories

 Motivation: something that stimulates interest or causes a

person to act in a certain way
 A professional understanding of the consumer is at the core of
the successful business practice in the tourism industry.
(Goeldner and Ritchie, 2003)
 Tourism businesses should be concerned with what motivates
tourists, how they make decisions, what they think of the
products they buy, how much they enjoy and learn during their
holiday experiences, how they interact with the local people and
environment and how they feel about their holidays.

 Problem: Pre-suppose tourists are rational decision makers,

tourism is often everything but rational
• Abstract questions of taste, fashion, identity, lifestyle

16
Mathieson & Wall’s Travel-
Buying Behaviour
 4 factors influence travel-buying
behaviour:
1. Traveller profile
– Age, education, attitudes, previous
experiences and motivations
2. Travel awareness
– Image of destination’s facilities and services
based on credibility of sources
3. Destination resources and characteristics
– Attractions & features
4. Trip features
– Distance, duration and perceived risk

The Tourist Destination

 Definitions

 “the focus of facilities and services

designed to meet the needs of the
tourist”

 “An area a tourist chooses to visit and

not transit”.

17
Components of the Tourist
Destination
 Attractions
 Accessibility
 Local transport, transport terminals
 Amenities
 Accommodation, food and beverage outlets, entertainment,
retailing and other like services
 Ancillary (Support) Services
 Marketing, development and coordination activities
 Provided by local organizations e.g. tourist information
booths, convention and visitors bureau, destination
marketing organizations
 Infrastructure and Superstructure

Attractions

 The most important component

 No attractions means no destination
means no visitors
 Attractions Typology
 Man Made
• Historic monuments
• Archaeological sites
• Cities
• Purpose-built centres e.g. theme parks, golf
courses, marinas, integrated resorts

18
Attractions
 Attractions Typology (cont’d)
 Natural
• Water-based – coastal, marine, lakes and rivers
• Landscape
• Wild-Life
• Forests & wilderness
 Cultural
• Events and festivals (music, dance)
• Folkloric artefacts
• Peoples, food
 Intangible
• Climate, the “welcome”, recreational activities,
business activities, economic/business activities,
image/appeal

Accessibility
 Gateways
 Air/sea ports, bus/train terminals

 Transport and routes into and exiting the

destination e.g. planes/air, trains/rail, cars/road,
ships/sea
 Transport and routes within the destination e.g.
taxis, buses, trains, boats, car/boat/bicycle-rental,
paths, trails, scenic drives, shuttle buses, park and
ride, explorer buses/submarines
 Need to consider quantity, capacity, location and
quality

19
Amenities
 Accommodation and food & beverage
sector
 Provides physical shelter, sustenance, hospitality
and creates lasting impressions
 Retailing & other services
 Includes retail shops, security services (e.g.
police) and others such as hairdressing, banks,
money changers, laundry, post offices and
insurance.
 Are usually located close to attraction
 Recreational business district

Ancillary Services

 Local organizations that provide the

following services:
 Destination promotion + marketing
 Development coordination and control for
sustainability
 Information/reservation services to trade and
public
 Advisory, consultancy and coordination to
local businesses
 Destination leadership

20
Infrastructure &
Superstructure
 Infrastructure
 Includes transportation, utilities (water, electricity), waste
treatment, telecommunications and healthcare and
security facilities
 Does not generate income and is a public investment

 Superstructure
 Includes accommodation, built attractions, retailing
and other facilities
 Usually a private sector and profit-motivated activity

Product Life Cycle (PLC) Theory

21
 Tourism Area Life Cycle (TALC)
Implications for Destination Marketing + Branding?

 the stages a destination goes through, from exploration to involvement

to development to consolidation to stagnation to rejuvenation or
decline (also known as the “tourism destination life cycle”)

The Tourism Marketing Environment

22
Factors Affecting Travel Demand
at the World Level

 Economic
 Undeveloped World
• Little tourism except domestic VFR
 Developing World
• Domestic and international tourism; inbound
tourism encouraged to earn foreign
exchange
 Developed World
• Major generators of domestic and
international tourism

Factors Affecting Travel

Demand at the World Level
 Demographic
 Levels of population growth and its development,
distribution and density
 Political
 Government involvement
 Political stability
 Technological
 Transport advancement
 Recreational technology
 Video conferencing, Internet + mobile
technologies

23
Factors Affecting Travel
Demand at the World Level
 Cultural Distance
 Difference in culture between origin area and the
destination

 Economic Distance
 Time & costs of reaching a destination

 Relative Costs of Living in Destination

Countries
 Relative to value of traveller’s own currency
 Price perception

Organizing and Managing

Tourism Marketing
 National tourist organizations (NTOs) are
central tourist agencies that make a
destination tourist friendly
 may be public, quasi-public, nonprofit, or
private
 this agency is often run by the central
government, state, or province, together
with local government officials

24
 Tourism Market Trends
 Some Trend Factors
 The opening of borders
(globalization) despite security and
terrorism concerns
 Cheaper air travel and more low-cost
carriers (LCC) or budget airlines
 An increase in the number of people
with time and money to travel
 More people with the urge to travel
(changing lifestyles)
 Emerging destinations (Silk road)
 Demand for “lifestyle” hotels

References
 Hayes, D. & Ninemeier, J. (2006). Hotel Operations
Management, Pearson , ISBN 0131711490.

 O’Fallon, M. & Rutherford, D. (2010). Hotel

Management & Operations, Wiley, ISBN
9780470177143.

 Contemporary readings will be assigned from the

Web and from traditional sources (e.g., noteworthy
articles from journals, magazines and other
periodicals) throughout the term. Many of the
readings have already been identified and noted
on the syllabus. Others will be announced and
distributed throughout the term.

25